E-Malt.com News article: UK: Late payments of big brand names cripple small firms

Small firms in the UK are waiting up to four months for invoices to be paid by several big brand names, research by the Federation of Small Businesses (FSB) revealed on September 16th.

Around 4,000 business failures were caused by late payments last year, according to the UK SME lobby. The group has now decided to "name and shame" a range of multinational companies for forcing smaller players out of the market by taking between 60 and 125 days to be settle their bills.

Over the last year, members of the Federation of Small Businesses have reported that larger firms are extending their payment time, including online superstore Amazon, which now waits 90 days before making payments. Courier company DHL charges 3% for paying invoices on time, according to the FSB, and beer giant Carlsberg changed its payment terms to 95 days from the end of the month of invoice.

Carlsberg told The Independent newspaper that the company had made the change "to get a better balance between payments from our customers to us, and from us to our suppliers".

The FSB has written to the companies concerned to explain how badly late payment affects the cash-flow of small firms, particularly during this economic period, and is urging them to sign up to the UK government-backed Prompt Payment Code .

John Wright, national chairman of the Federation of Small Businesses, said poor payment practices in the public and private sectors are crippling small companies.

"Larger organisations must be given a loud and clear message that they must stop using the recession as an excuse to use small firms as source of credit. The FSB would like to see as many private and public sector organisations as possible signed up to the Prompt Payment Code to ensure we can put an end to this plague and change the culture of late payments for good," he said.

Earlier this year, the EU executive published a revamped Late Payments Directive which requires public authorities to pay contractors within 30 days or face financial penalties.

The move is part of legislative commitments made last year under the Small Business Act and is expected to benefit SMEs that win public contracts by improving cash flow.

Under the revised directive, local authorities, national governments and European agencies will have to pay compensation for recovery costs, and flat-rate interest of 5% of the amount due, which kicks in from day one of the delay.



16 September, 2009